The CML, which has shied away from predictions during these last few turbulent months, has predicted that net lending will plummet, as gross lending is slashed by 44 per cent on 2008 figures, and 60 per cent on 2007 figures, to just £145bn.
It also envisages housing market activity to remain extremely subdued, with around 700,000 housing transactions in 2009, down from around 900,000 this year and 1.6 million in 2007.
It also predicts that three-month arrears will rise to 500,000, rocketing to 4.41 per cent of all mortgages. Worryingly it predicts that 40,000 more mortgages will slip into three-month arrears before the end of this year.
It also stands by its previous prediction that repossession cases would rise to 75,000 over 2009.
The CML says: “It is hard to imagine a more challenging environment in which to be making market forecasts. As the difficulties in the financial markets have begun to affect real economic activity, there have been seismic shifts in the macro-economic policies of governments and the perceived role of the state.
“As the CML has pointed out, and the Chancellor acknowledged in his evidence to the Treasury Select Committee last week, the tensions affecting lenders in terms of balancing the interests of savers, existing borrowers, new borrowers, and prudent balance sheet management are significant.
“But forecasting in the current environment is extremely challenging. So these figures represent a “best estimate” of direction of travel, rather than a precise analysis. They remain subject to a range of market and policy uncertainties.”